Sturm Ruger & Co Inc: Form 10-Q for the period ended Sep 27, 2025

Company Overview

Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99% of sales are from firearms. Export sales accounted for approximately 5% of total sales for each of the nine month periods ended September 27, 2025 and September 28, 2024. The Company’s design and manufacturing operations are located in the United States and almost all product content is domestic. The Company’s firearms are sold through a select number of independent wholesale distributors, principally to the commercial sporting market.

The Company also manufactures investment castings made from steel alloys and metal injection molding (“MIM”) parts for internal use in its firearms and for sale to unaffiliated, third-party customers. Less than 1% of sales are from the castings segment.

Orders for many models of firearms from the independent distributors tend to be stronger in the first quarter of the year and weaker in the third quarter of the year. This is due in part to the timing of the distributor show season, which occurs during the first quarter.

Results of Operations

During the nine months ended September 27, 2025 the Company has undertaken several strategic initiatives to enhance its operational and market positioning. These initiatives include:

• A leadership transition to welcome a new CEO and evolve its leadership structure, along with an organizational realignment designed to improve efficiency and effectiveness,
• An inventory rationalization, in which the Company revised its product strategy for 2025 and beyond and reassessed its raw material, work-in-process and finished goods inventories to identify and reserve for inventory that is now excess, obsolete or ready to be discontinued due to the revised product roadmaps, including legacy models that have run their lifecycle, products that are no longer part of the long-term strategy, and Marlin-related items that are not part of the product roadmap for that brand, and
• A product repositioning to address its product strategy for the future and take a hard look at current market conditions, consumer demand and overall economics to identify areas where it has desirable products, with strong features that need to reach its customers at a better price point.

These initiatives impacted the results of operations for the nine month period ending September 27, 2025 as follows, which reduced diluted earnings per share $1.46:

• Sales reduction of $5.7 million related to the sale of 67,000 units of discontinued models
• Increased cost of sales of $17.0 million, reflecting the write-off of inventory and other assets related to the revised product strategy and product roadmap
• Increased general and administrative expenses of $3.7 million related to the leadership transition and organizational realignment

On July 1, 2025, the Company acquired substantially all of the assets of Anderson Manufacturing (“Anderson”) for a total purchase price of $15.8 million in cash, with $15 million having been paid in cash at the closing of the transaction and $0.8 million having been held back from the purchase price for the purposes described in Note 3 above (the “Anderson Acquisition”). The Anderson Acquisition included, among other things, property, equipment, inventory, and all intellectual property related to Anderson, including the Anderson names and marks, and all derivatives thereof.

The primary purpose of the Anderson Acquisition was to increase the Company’s production capabilities. The transaction was funded by the Company with cash on hand and has been accounted for in accordance with ASC 805 - Business Combinations, which requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the tangible and intangible assets acquired, using the bottom up approach, to estimate their value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets was recorded as goodwill. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, yet are inherently uncertain and, as a result, may differ from actual performance. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the estimated fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the period in which such revised estimates are identified. No such adjustments were recorded in the three months ended September 27, 2025.

The Company incurred acquisition related costs of approximately $0.5 million, which are included in selling, general and administrative expenses in the Company’s Consolidated Statements of Income and Comprehensive Income for the three and nine month periods ended September 27, 2025.

Demand

The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 0.3% in the first nine months of 2025 compared to the prior year period. For the same period, National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 4.3%. Estimated sell-through from the independent distributors to retailers and total adjusted NICS background checks for the trailing seven quarters follow:

(1) The estimates for each period were calculated by taking the beginning inventory at the distributors, plus shipments from the Company to distributors during the period, less the ending inventory at distributors. These estimates are only a proxy for actual market demand as they:

• Rely on data provided by independent distributors that are not verified by the Company,
• Do not consider potential timing issues within the distribution channel, including goods-in-transit, and
• Do not consider fluctuations in inventory at retail.

(2) NICS background checks are performed when the ownership of most firearms, either new or used, is transferred by a Federal Firearms Licensee. NICS background checks are also performed for permit applications, permit renewals, and other administrative reasons.

The adjusted NICS data presented above was derived by the NSSF by subtracting out NICS checks that are not directly related to the sale of a firearm, including checks used for concealed carry (“CCW”) permit application checks, as well as checks on active CCW permit databases. The adjusted NICS checks represent less than half of the total NICS checks.

Adjusted NICS data can be impacted by changes in state laws and regulations and any directives and interpretations issued by governmental agencies.

Orders Received and Ending Backlog

The Company uses the estimated unit sell-through of its products from the independent distributors to retailers, along with inventory levels at the independent distributors and at the Company, as the key metrics for planning production levels. The Company generally does not use the orders received or ending backlog for planning production levels.

The units ordered, value of orders received, average sales price of units ordered, and ending backlog for the trailing seven quarters are as follows (dollars in millions, except average sales price):

(All amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns.)

Production

The Company reviews the estimated sell-through from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company to plan production levels. The Company’s overall production in the third quarter of 2025 decreased 9.6% from the second quarter of 2025.

Summary Unit Data

Firearms unit data for the trailing seven quarters are as follows (dollar amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns):

Inventories

During the first nine months of 2025, the Company’s finished goods inventory increased by 18,900 units and distributor inventories of the Company’s products increased by 15,900 units.

Inventory unit data for the trailing seven quarters follows:

(1) Distributor ending inventory is provided by the Company’s independent distributors. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by the distributors.

(2) This total does not include inventory at retailers. The Company does not have access to data on retailer inventories of the Company’s products.

Net Sales, Cost of Products Sold, and Gross Profit

Net sales, cost of products sold, and gross profit data for the three months ended (dollars in millions):

The increase in consolidated net sales and net firearms sales for the three months ended September 27, 2025 is attributable to increased demand for the Company’s new products, partially offset by a reduced average selling price. Sales of new products, including the RXM pistol, Marlin lever-action rifles, and American Centerfire Rifle Generation II represented $40.6 million or 33.7% of firearm sales in the three months ended September 27, 2025. New product sales include only major new products that were introduced in the past two years.

The decreased gross profit for the three months ended September 27, 2025 is partially attributable to $1.4 million of operating costs at the new Hebron facility that was acquired in July, increased costs associated with material and technology, a product mix shift toward products with relatively lower margins that remain in relatively stronger demand and sales promotional expenses, partially off-set by increased leveraging of fixed costs resulting from increased production.

The decrease in gross margin for the three months ended September 27, 2025 is attributable to the aforementioned factors.

Net sales, cost of products sold, and gross profit data for the nine months ended (dollars in millions):

The increase in consolidated net sales and net firearms sales for the nine months ended September 27, 2025, despite the $5.7 million reduction related to the close out of 67,000 units of discontinued models, is attributable to increased demand for the Company’s new products, partially offset by a reduced average selling price. Sales of new products, including the RXM pistol, Super Wrangler revolver, Marlin lever-action rifles, and American Centerfire Rifle Generation II, represented $123.3 million or 32.9% of firearm sales in the first nine months of 2025. New product sales include only major new products that were introduced in the past two years.

The decreased gross profit for the nine months ended September 27, 2025 is attributable to inventory rationalization write-offs and the aforementioned sales reductions taken in the second quarter of 2025, $1.4 million of operating costs at the new Hebron facility that was acquired in July, increased costs associated with material and technology, a product mix shift toward products with relatively lower margins that remain in relatively stronger demand and sales promotional expenses, partially off-set by favorable deleveraging of fixed costs resulting from increased production.

The decrease in gross margin for the nine months ended September 27, 2025 is attributable to the aforementioned factors.

Selling and General and Administrative Expenses

Selling and general and administrative expenses data for the three months ended (dollars in millions):

The increase in selling expenses for the three months ended September 27, 2025 was attributable to increases in industry show costs and several promotional and marketing initiatives, mostly offset by decreases in spending on printing, advertising, and shipping expenses.

The increase in general and administrative expenses for the three months ended September 27, 2025 was primarily attributable to expenses incurred due to the Company’s leadership transition and organizational realignment, increased information technologies related expenses, and professional fees associated with the purchase of the Anderson Manufacturing assets.

Selling and general and administrative expenses data for the nine months ended (dollars in millions):

The increase in selling expenses for the nine months ended September 27, 2025 was attributable to increases in advertising and several promotional and marketing initiatives, partially offset by decreases in spending on industry shows, personnel costs, and shipping expenses.

The increase in general and administrative expenses for the nine months ended September 27, 2025 was primarily attributable to expenses incurred due to the Company’s leadership transition and organizational realignment, as well as increased information technologies related expenses and professional fees associated with the purchase of the Anderson Manufacturing assets.

Other Income

Other income data for the three months ended (dollars in millions):

The decrease in other income for the three months ended September 27, 2025 was attributable to decreased interest income.

Other income data for the nine months ended (dollars in millions):

The decrease in other income for the nine months ended September 28, 2025 was attributable to decreased interest income.

Income Taxes and Net Income

The Company's 2025 and 2024 effective tax rates differ from the statutory federal tax rate due principally to research and development tax credits, state income taxes and the nondeductibility of certain executive compensation. The reduction in 2025 earnings increased the impact of these items. During the three months ended September 27, 2025, the Company revised its estimated annual effective income tax rate for 2025 and recognized a $3.0 million increase to its income tax benefit for the nine months ended September 27, 2025. This resulted in effective income tax rates of 174.8% and 33.0% for the three and nine months ended September 27, 2025, respectively. The Company’s effective income tax rate was 10.0% and 18.9% for the three and nine months ended September 28, 2024, respectively.

As a result of the foregoing factors, consolidated net income was $1.6 million for the three months ended September 27, 2025, a reduction of 66.6% from $4.7 million consolidated net income in the comparable prior year period.

Consolidated net loss was $7.9 million for the nine months ended September 27, 2025, as compared to consolidated net income of $20.1 million in the nine month period ended September 28, 2024.

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding its financial results, the Company refers to various United States generally accepted accounting principles (“GAAP”) financial measures and two non-GAAP financial measures, EBITDA and EBITDA margin, which management believes provides useful information to investors. These non-GAAP financial measures may not be comparable to similarly titled financial measures being disclosed by other companies. In addition, the Company believes that the non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. The Company believes that EBITDA and EBITDA margin are useful to understanding its operating results and the ongoing performance of its underlying business, as EBITDA provides information on the Company’s ability to meet its capital expenditure and working capital requirements, and is also an indicator of profitability. The Company believes that this reporting provides better transparency and comparability to its operating results. The Company uses both GAAP and non-GAAP financial measures to evaluate the Company’s financial performance.

EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this by adding the amount of interest expense, income tax expense, and depreciation and amortization expenses that have been deducted from net income back into net income, and subtracting the amount of interest income that was included in net income from net income to arrive at EBITDA. The Company’s EBITDA calculation also excludes any one-time non-cash, non-operating expense. The Company calculates EBITDA margin by dividing EBITDA by total net sales.

EBITDA was $2.9 million for the three months ended September 27, 2025, a decrease of 71.3% from $9.9 million in the comparable prior year period.

For the nine months ended September 27, 2025 EBITDA was $19.4 million, a decrease of 48.9% from $37.9 million in the comparable prior year period.

Non-GAAP Reconciliation – EBITDA

EBITDA

(Unaudited, dollars in thousands)

Financial Condition

Liquidity and Capital Resources

At the end of the third quarter of 2025, the Company’s cash and short-term investments totaled $80.8 million. Pre-LIFO working capital of $217.6 million, less the LIFO reserve of $68.2 million, resulted in working capital of $149.4 million and a current ratio of 3.5 to 1.

Operations

Cash provided by operating activities was $38.8 million for the nine months ended September 27, 2025, compared to $35.5 million for the comparable prior year period. The slight increase in cash provided in the nine months ended September 27, 2025 is primarily attributable to the impact of the write-off of inventory related to the Company’s inventory rationalization, increased collections of trade receivables, and the lower net payouts of accrued employee compensation and benefits in the nine months ended September 27, 2025, partially offset by the decrease in net income and the lesser reductions in prepaid expenses and other current assets in the nine months ended September 27, 2025.

Third parties supply the Company with various raw materials for its firearms and castings, such as steel, fabricated steel components, walnut, birch, beech, maple and laminated lumber for rifle stocks, wax, ceramic material, metal alloys, various synthetic products and other component parts. A limited supply of these materials in the marketplace can result in increases to purchase prices and adversely affect production levels. If market conditions result in a significant prolonged inflation of certain prices or if adequate quantities of raw materials cannot be obtained, the Company’s manufacturing processes could be interrupted and the Company’s financial condition or results of operations could be materially adversely affected.

Investing and Financing

Capital expenditures for the nine months ended September 27, 2025 totaled $27.6 million, including $15.0 million at the closing of such transaction for the Anderson Acquisition, an increase from $17.2 million in the comparable prior year period. The Company expects total capital expenditures in 2025 to be approximately $20 million, exclusive of the Anderson purchase, as we invest in new product introductions, expand capacity, upgrade our manufacturing capabilities and strengthen our facility infrastructure. Actual capital expenditures could vary significantly from the projected amounts due to the timing of capital projects. The Company finances, and intends to continue to finance, all of these activities with funds provided by operations and current cash and cash equivalents.

On July 1, 2025 the Company completed the asset purchase of Anderson Manufacturing, a manufacturer of firearms and firearm accessories based in Hebron, Kentucky for a total purchase price of $15.8 million, $15 million of which was paid at the closing of such transaction. This strategic purchase includes Anderson’s manufacturing facility and machinery and will provide Ruger the opportunity to work with a skilled and experienced workforce, strengthening its production capabilities and expanding its product offerings.

Dividends of $9.5 million were paid during the nine months ended September 27, 2025. The Company has financed its dividends with cash provided by operations and current cash. The quarterly dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share. The Company’s practice is to pay a dividend of approximately 40% of net income.

On October 31, 2025, the Company’s Board of Directors authorized a dividend of 4¢ per share to shareholders of record on November 17, 2025, payable on November 28, 2025. This dividend is approximately 40% of adjusted diluted earnings of 10¢ per share for the third quarter of 2025. The payment of future dividends depends on many factors, including internal estimates of future performance, then-current cash and short-term investments, and the Company’s need for funds.

As of September 27, 2025, the Company had $38.9 million of United States Treasury instruments which mature within one year. The Company also invests available cash in a bank-managed money market fund that invests exclusively in United States Treasury instruments which mature within one year. At September 27, 2025, the Company’s investment in this money market fund totaled $25.9 million.

During the nine months ended September 27, 2025 the Company purchased 730,665 shares of its common stock for $26.0 million in the open market. The average price per share purchased was $35.60. These purchases were funded with cash on hand. As of September 27, 2025, $14.3 million remained authorized for future stock repurchases.

Based on its unencumbered assets, the Company believes it has the ability to raise cash through the issuance of short-term or long-term debt. The Company’s unsecured $40 million credit facility, which expires on January 7, 2028, was unused at September 27, 2025.

Other Operational Matters

In the normal course of its manufacturing operations, the Company is subject to occasional governmental proceedings and orders pertaining to workplace safety, firearms serial number tracking and control, waste disposal, air emissions and water discharges into the environment. The Company believes that it is generally in compliance with applicable Bureau of Alcohol, Tobacco, Firearms & Explosives, environmental, and safety regulations and the outcome of any proceedings or orders will not have a material adverse effect on the financial position or results of operations of the Company. If these regulations become more stringent in the future and the Company is not able to comply with them, such noncompliance could have a material adverse impact on the Company.

The Company has 13 independent distributors that service the domestic commercial market. Additionally, the Company has 47 and 26 distributors servicing the export and law enforcement markets, respectively.

The Company self-insures a significant amount of its product liability, workers’ compensation, medical, and other insurance. It also carries significant deductible amounts on various insurance policies. In September 2024, the Company did not renew its product liability coverage with its incumbent carriers and established a wholly-owned captive insurance company for claims made on or after September 1, 2024.

The Company expects to realize its deferred tax assets through tax deductions against future taxable income.

On October 14, 2025, the Company announced that its Board of Directors (the “Board”) had approved the adoption of a limited-duration stockholder rights plan (the “Rights Plan”). The Rights Plan is effective October 14, 2025 (“Effective Date”) and will expire on October 13, 2026. The Board, in consultation with its advisors, adopted the Rights Plan in response to the public announcement by Beretta Holding S.A. (“Beretta”) that it had accumulated a significant economic interest in Ruger’s common stock and intends to engage in discussions with the Company regarding “potential areas of operational and strategic collaborations”. The Rights Plan is intended to ensure that the Board remains in the best position to perform its fiduciary duties and to enable all stockholders to receive fair and equal treatment. It is also designed to allow all stockholders to realize the long-term value of their investment by reducing the likelihood that Beretta would gain control through open market accumulation or other coercive tactics without appropriately compensating the Company’s stockholders or allowing the Board sufficient time to make informed judgments. The Rights Plan is a temporary measure to give the Board time to understand Beretta’s intentions and evaluate options. The summary of the terms of the Rights Plan set forth in Note 15 (above) is hereby incorporated by reference herein; provided, however, that such summary of the Rights Plan is qualified in its entirety by the Rights Plan, which is attached as Exhibit 4.1 to this Form 10-Q.

Adjustments to Critical Accounting Policies

The Company has not made any adjustments to its critical accounting estimates and assumptions described in the Company’s 2024 Annual Report on Form 10-K filed on February 19, 2025, or the judgments affecting the application of those estimates and assumptions.

Forward-Looking Statements and Projections

The Company may, from time to time, make forward-looking statements and projections concerning future expectations. Such statements are based on current expectations and are subject to certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated castings sales and earnings, the need for external financing for operations or capital expenditures, the results of pending litigation against the Company, the impact of future firearms control and environmental legislation, and accounting estimates, any one or more of which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publish revised forward-looking statements to reflect events or circumstances after the date such forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events.

The interest rate market risk implicit to the Company at any given time is typically low, as the Company does not have significant exposure to changing interest rates on invested cash. There has been no material change in the Company’s exposure to interest rate risks during the three months ended September 27, 2025.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (the “Disclosure Controls and Procedures”), as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 27, 2025.

Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 27, 2025, such Disclosure Controls and Procedures are effective to ensure that information required to be disclosed in the Company’s periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate, to allow timely decisions regarding disclosure.

The Company’s Chief Executive Officer and Chief Financial Officer have further concluded that, as of September 27, 2025, there have been no material changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 27, 2025 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

The effectiveness of any system of internal controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that the Disclosure Controls and Procedures will detect all errors or fraud. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system will be attained.

During the three months ended September 27, 2025, there were no material changes in the Company’s risk factors from the information provided in Item 1A. Risk Factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, and in Part II, Item 1A Risk Factors included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2025, other than as set forth below:

The Company’s Rights Plan could discourage, delay, or prevent a change in control over us and may affect the trading price of our Common Stock.

On October 14, 2025, the Board approved the adoption of the Rights Plan and authorized and declared a dividend of one common stock purchase right (a “Right”) for each share of Common Stock outstanding at the close of business on October 24, 2025 and that may become outstanding between such date and the Distribution Date (as defined in the Rights Plan) or the earlier Expiration Date (as defined in the Rights Plan). If the Rights become exercisable, all holders of Rights (other than the person or group triggering the Rights Plan, whose Rights would become void) will be entitled to acquire shares of Common Stock at a 50% discount to the then-current market price or the Company may exchange each Right held by such holders for one share of Common Stock. The Rights Plan may discourage, delay, or prevent a change of control or acquisition of the Company, even if such action may be considered beneficial by some stockholders of the Company, and could limit the price that investors would be willing to pay in the future for the Company’s Common Stock. The foregoing summary of the Rights Plan is qualified in its entirety by the Rights Plan, which is attached as Exhibit 4.1 to this Form 10-Q.

The Company’s business could be negatively affected as a result of actions of activist stockholders, and such activism could adversely affect the strategic direction and business results of the Company.

Publicly traded companies are increasingly subject to activist stockholders advocating corporate actions such as operational, governance, management or social changes, financial restructurings, increased borrowings, special dividends, stock repurchases, or sales of assets or entire companies to third parties or to the activist stockholders themselves. The Company has been and may continue to be subject to actions from activist stockholders or others that may not align with its business strategies or may not be in the best interests of all of its stockholders. Actions taken by the Board and management in seeking to maintain constructive engagement with certain stockholders may not be successful to prevent the occurrence of stockholder activist campaigns or changes that adversely affect the strategic direction or business results of the Company.